Courts Cloud Outlook for Health Subsidies

Conflicting Rulings Portend Confusion During Fall Enrollment Period

Health-industry officials said last week's conflicting court rulings over federal health-law subsidies have set the stage for further confusion when consumers return to marketplaces this fall to shop for next year's coverage.

On Tuesday, the U.S. Court of Appeals for the District of Columbia Circuit struck down a regulation that provided subsidies for people seeking coverage through the federally run exchange that serves 36 states. Then, an appeals court in Virginia issued a ruling upholding the subsidies. The issue isn't likely to be resolved in the near future, and health-care executives said they will be closely watching the appeals process.

The rulings have no immediate impact on the estimated 4.7 million people receiving the subsidies. But "people are going to be coming in with more questions about these court cases," said
Jason Stevenson,
a spokesman for the Utah Health Policy Project, a nonprofit that helps residents enroll on the federal exchange. "People are already asking about the long-term stability of the [Affordable Care Act]."

Insurers including
Aetna
,
Molina Healthcare
and others said they would nonetheless move forward with plans to sell coverage in the marketplaces -- including in states that use the federal exchange where subsidies are in question. Others said they would seek to reassure consumers that, at least for now, nothing has changed.

Hospitals in many states were already under pressure after a 2012 Supreme Court ruling allowed state officials to opt out of the law's Medicaid expansion. If courts ultimately strip subsidies from the federally run exchanges, hospitals in states opposed to the health law could end up missing out on most of the law's benefit for the industry.

New Money-Fund Rules

U.S. regulators approved rules intended to prevent a repeat of an investor exodus out of money-market mutual funds during the financial crisis, addressing one of the biggest unresolved issues from the 2008 meltdown.

The asset-management industry, long wary of stricter rules, largely said it could live with the new regulations, which the Securities and Exchange Commission backed in a 3-2 vote.

The rules would require funds that purchase short-term corporate debt or municipal bonds and cater to institutional investors to abandon their fixed $1 share price and float in value like other mutual funds. Prime funds sold to individual investors can keep the $1 share price. The rules also allow all money funds to temporarily block investors from withdrawing cash in times of stress or allow the funds to impose fees for investors to redeem shares.

—Andrew Ackerman And Kirsten Grind The Wall Street Journal

Tight Mortgage Standards

A recent analysis by
Goldman Sachs
economists concludes that while mortgage-lending standards have eased a bit in the past two years, it's harder to get a mortgage now than it was in 2000-02, before lenders relaxed standards and helped bring on the housing bubble.

Tighter credit is a problem for the housing market because the "next phase of the housing recovery depends crucially on mortgage-credit availability," writes
Hui Shan
of Goldman. "Mortgage credit supply is still significantly limited."

Only in one of the seven categories the company studied did Goldman find that credit standards had eased since 2002: Average loan-to-value ratios, primarily a function of a down-payment size, are slightly higher. While no-money-down lending has largely disappeared, the Federal Housing Administration will insure mortgages in which borrowers have made just 3.5% down payments, and those programs have been extremely popular in recent years.

Analysts say the mortgage market has bifurcated in the past five years as lenders have grown more risk-averse. People with decent credit, stable and easy-to-verify incomes have better access to loans than is widely believed, though FHA mortgage insurance has become more expensive. People with irregular or harder-to-document incomes have a harder time getting loans.

The
Obama
administration wants banks to ease standards, a position at odds with lenders such as
J.P. Morgan Chase
,
which are smarting over legal bills for crisis-era loans.

—Nick Timiraos Real Time Economics blog WSJ.com

Home Sales Slide

The market for newly built homes weakened in the first half of the year, a development that's likely to impede economic growth and could hold back job creation in 2014.

Sales of new single-family homes fell a year-on-year 4.9% in the first half overall, the Commerce Department reported. From a year earlier, new-home sales were down 11.5% in June.

June sales fell 8.1% from May to a seasonally adjusted annual rate of 406,000, well below expectations. May sales were revised to a rate of 442,000 from a previously estimated 504,000.

Newly built homes account for about 10% of U.S. home-buying activity. Weakness in the sector, along with stalled mortgage applications and tight lending standards, "[raises] serious questions about the state of the housing market going forward," said
BNP Paribas
economist
Yelena Shulyatyeva.

The story for existing homes is somewhat better. Sales of previously owned homes rose for the third straight month in June for the best reading since last fall. That suggests buyers returned to the market during the spring shopping season.

—Eric Morath And Kris Hudson The Wall Street Journal

More Firms Raise Pay

The share of U.S. firms giving pay raises has nearly tripled since last fall, according to a private survey of business economists, though official data show no broad acceleration in wage growth.

Some 43% of National Association for Business Economics members who responded to the survey said wages and salaries at their firms have risen in the past three months, up from 16% in October. No respondents said wages had fallen, and 57% said wages were unchanged in the second quarter.

Raises were spotty by sector. Just 11% of goods-producing firms and 35% of service firms reported increases. Some 59% of finance, insurance and real-estate firms reported raises, as did 50% of transport, utility, information and communications companies.

Still, average hourly earnings of all private-sector workers rose just 2% in June from a year earlier, in line with the postrecession trend, according to the Labor Department.

—Ben Leubsdorf Real Time Economics blog WSJ.com

Jobless Claims Plunge

New applications for unemployment benefits reached an 8½-year low in mid-July, the latest sign of strength in the labor market. Initial claims for jobless aid, a proxy for layoffs, fell by 19,000 to a seasonally adjusted 284,000 in the week ended July 19, the Labor Department said Thursday.

That was the lowest level for first-time claims since February 2006 and below the 305,000 claims forecast by economists surveyed by The Wall Street Journal. The prior week was revised up slightly.

"Claims are often volatile in the summer because of the timing of shutdowns at auto plants for retooling, but even so, the downward trend in claims is evident and very positive for the labor market and the overall economy," said
Stuart Hoffman,
chief economist at
PNC Financial Services Group
.

Weekly claims have hovered near 300,000 since May but haven't dropped below that level consistently since 2006, when the unemployment rate was below 5%. In June, it was 6.1%.

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